---
title: "How to Challenge an HMRC Schedule 36 Penalty"
url: https://taxdisputes.co.uk/2026/10/how-to-challenge-an-hmrc-schedule-36-penalty/
date: 2026-10-15
modified: 2026-10-15
lang: en
author: "Muhammad Awais Bahadur"
description: "A Schedule 36 penalty from HMRC is not final. This guide explains the types of penalty, the 30 day appeal deadline, the grounds for challenge including reasonable excuse, and how to take your appeal to the tax tribunal."
categories:
  - "Uncategorized"
tags:
  - "challenge HMRC penalty"
  - "First-tier Tribunal tax appeal"
  - "HMRC daily penalties"
  - "HMRC information notice"
  - "HMRC internal review"
  - "HMRC penalty appeal"
  - "HMRC tax solicitors"
  - "late penalty appeal"
  - "reasonable excuse HMRC"
  - "Schedule 36 Finance Act 2008"
  - "Schedule 36 penalty"
  - "tax dispute lawyers"
image: https://taxdisputes.co.uk/wp-content/uploads/2026/10/Golden-Legal-Notice-with-Key-and-Chain-1024x577.png
word_count: 1831
---

# How to Challenge an HMRC Schedule 36 Penalty

If HMRC has charged you a penalty for not responding to an information request, you may be wondering whether it can be challenged. In many cases it can. A penalty under Schedule 36 of the Finance Act 2008 is not automatic, final or beyond argument. You have a statutory right to appeal, and the deadline is short.

This guide explains what a Schedule 36 penalty is, the grounds on which it can be overturned, the steps to appeal and the mistakes that cost taxpayers their case.

**HMRC TAX DISPUTES LEGAL ADVICE & DEFENCE**

Our lawyers have a [track record of successfully challenging HMRC](https://taxdisputes.co.uk/success/) decisions and will assist you to get an optimal result. We analyse the merits at the very outset in an initial video conference together with leading (ex-HMRC and Big 4) tax litigation counsel. We provide urgent advice and representation to clients from our unique expert team of established Tax specialist solicitors and barristers with a proven track record of delivering results. Call us on +442071830529, or email [contact@lexlaw.co.uk](mailto:contact@lexlaw.co.uk).

[Submit Your Case to Our Lawyers ✔ ](https://taxdisputes.co.uk/legal-case-assessment/)[☎ 02071830529](tel:+442071830529)

## What Is a Schedule 36 Information Notice?

Schedule 36 gives HMRC its main power to gather information when checking someone’s tax position. Under paragraph 1, an HMRC officer can issue a written information notice requiring you to provide information or produce documents that are reasonably required to check your tax position.

HMRC can issue these notices during a [tax investigation](https://taxdisputes.co.uk/hmrc-tax-investigations-solicitors-london/), a compliance check or an enquiry into a return. A notice can ask for bank statements, invoices, contracts, accounts, board minutes or explanations of particular transactions.

In some cases HMRC must first obtain the approval of the First-tier Tribunal before issuing a notice. HMRC can also issue third party notices to banks, accountants and customers. This article focuses on penalties for failing to comply with a notice addressed to you.

## Which Penalties Can HMRC Charge Under Schedule 36?

The penalty regime is more serious than many taxpayers realise. The starting point is an initial penalty of £300 under paragraph 39, charged where you fail to comply with an information notice or obstruct an HMRC officer during an inspection. If the failure continues after that penalty, daily default penalties of up to £60 a day can follow under paragraph 40. Where the failure runs beyond 30 days, HMRC can ask the Upper Tribunal to set increased daily penalties of up to £1,000 a day under paragraph 49A.

Separately, paragraph 40A allows a penalty of up to £3,000 where information or documents you supplied were materially inaccurate and the inaccuracy was careless or deliberate. At the top end, where HMRC suspects that your failure has led to a loss of tax, it can apply to the Upper Tribunal under paragraph 50 for a tax-related penalty linked to the tax at stake. These can reach very large sums.

The £300 figure can look modest. Ignoring it, however, can open the door to the far heavier penalties above and to a more aggressive enquiry. Our guide to [HMRC penalties](https://taxdisputes.co.uk/hmrc-penalties/) explains how the different regimes interact.

## What Is the Deadline to Appeal a Schedule 36 Penalty?

You normally have **30 days** from the date of the penalty notice to appeal (paragraph 47). The same 30 day period applies if you want to appeal against the information notice itself (paragraph 29), counted from the date the notice was issued.

Do not let the deadline pass while you gather documents or wait for your accountant. A holding appeal that sets out your grounds and promises further detail is better than silence. If you have already missed the deadline, a late appeal may still be possible. HMRC or the tribunal can accept one where there is a good reason for the delay and you act promptly. See our guide to [late appeals to the Tax Tribunal](https://taxdisputes.co.uk/late-hmrc-tax-appeals/).

## Grounds for Challenging a Schedule 36 Penalty

A penalty can be challenged on several grounds. The strongest cases often combine more than one.

#### 1. You Had a Reasonable Excuse

Under paragraph 45, no penalty arises if you satisfy HMRC, or the tribunal on appeal, that you had a reasonable excuse for the failure. The legislation does not define the term. It is judged on the facts, by asking what a reasonable taxpayer in your position, trying to meet their obligations, would have done.

HMRC’s own guidance accepts that a reasonable excuse can exist. Situations that commonly succeed include serious illness or hospitalisation of you or a close family member, a bereavement around the time the deadline fell, and records lost or destroyed through fire, flood or theft. Documents held by a third party who refused to release them despite your efforts can also qualify, as can HMRC’s own errors, such as sending the notice to the wrong address.

The legislation is equally clear about what does not count. Lack of funds is generally not a reasonable excuse unless caused by events outside your control. Relying on someone else, such as an accountant, is not a reasonable excuse unless you took reasonable care to avoid the failure.

If your excuse existed but has since ended, you are treated as still having it provided you remedy the failure without unreasonable delay once it ended. That is why prompt action matters even after a difficult period.

#### 2. The Information Notice Itself Was Not Valid

A penalty depends on a valid notice. If the notice was defective, the penalty may fall with it. We look at whether the notice was properly addressed and validly given, and whether the information or documents were genuinely reasonably required to check your tax position rather than requested speculatively. We also consider whether the request was clear enough for you to comply with, and whether it required something HMRC was not entitled to ask for.

Schedule 36 also limits what HMRC can require. In broad terms, HMRC cannot demand documents that are not in your possession or power, material protected by legal professional privilege, or documents that are very old without the appropriate authorisation. A penalty for failing to hand over something you could not lawfully be required to provide is open to challenge.

#### 3. You Complied, or Substantially Complied

Sometimes the penalty is simply wrong. You may have replied in time but the response was misfiled, or you provided most of what was asked and HMRC treated the notice as ignored. Evidence of what you sent and when, such as email trails, recorded delivery receipts and portal confirmations, can defeat a penalty quickly.

#### 4. HMRC Made a Procedural Error

HMRC must follow the statutory process when assessing a penalty. It must assess within the permitted time limits and give proper notification of the penalty and your appeal rights. Errors in the penalty notice, mistakes in calculating daily penalties and assessments made out of time are all points we routinely check.

## How to Appeal an HMRC Schedule 36 Penalty: Step by Step

**Step 1: Note the dates.** Identify the date of the penalty notice and calculate your 30 day deadline immediately.

**Step 2: Gather the paperwork.** Collect the information notice, any warning letters, the penalty notice and all your correspondence with HMRC.

**Step 3: Write to HMRC to appeal.** Your written appeal should identify the penalty, state that you appeal under paragraph 47 and set out your grounds. For guidance on form and content, see our page on the [notice of appeal to HMRC](https://taxdisputes.co.uk/hmrc-appeal-lawyers-london/).

**Step 4: Comply with the notice if you still can.** Providing the outstanding information, even late, usually stops further daily penalties and strengthens your position.

**Step 5: Consider an HMRC internal review.** HMRC will usually offer an independent review of its decision by an officer who was not involved in the original decision. This is a free and often effective route. Our guide to [HMRC internal review appeals](https://taxdisputes.co.uk/hmrc-internal-review-appeals-solicitors-london/) explains what to expect.

**Step 6: Take the appeal to the tribunal if necessary.** If HMRC upholds the penalty, you can notify your appeal to the independent First-tier Tribunal (Tax Chamber). Our team can handle this stage through [First-tier Tax Tribunal representation](https://taxdisputes.co.uk/first-tier-tax-tribunal-solicitors-london/). The tribunal can confirm the penalty or substitute another decision HMRC had power to make.

Tax Tribunal appeals are generally cost-protected for most taxpayers. In the usual case, the tribunal does not order the losing side to pay the other side’s costs unless a party has acted unreasonably. That makes a well-prepared appeal a proportionate step for many people.

## What Makes a Reasonable Excuse Argument Succeed or Fail?

Tribunals look for a credible account that is consistent with the documents. The strongest appeals start with a clear timeline showing what happened, when, and what you did about it at each stage. They are backed by independent evidence, such as medical letters, police reports, insurance claims or correspondence with third parties, and they show prompt action once the problem ended. A genuine excuse is undermined by months of further delay. A well-drafted witness statement helps too, because it tells your story precisely and consistently. Our team prepares these as part of [drafting witness statements](https://taxdisputes.co.uk/taxpayer-witness-statement-drafting-representation-hmrc-advice/).

Appeals fail when the account is vague, when it contradicts the documents or when the only explanation is that the matter was overlooked or left to someone else.

## Should You Let Your Accountant Handle It?

Many people assume their accountant should deal with HMRC. For a Schedule 36 dispute, that can be risky. Accountants are experts in compliance and accounts, but they are not usually litigators, and communications with them are generally not protected by legal professional privilege in the way communications with solicitors and barristers are. Information you share with an accountant can be requested by HMRC. A lawyer-led strategy lets you control what is disclosed and when.

If an accountant’s mistake caused the failure in the first place, for example by missing a notice or failing to advise you properly, you may also have a claim against them. See our guides to [claims against negligent accountants](https://professionalnegligenceclaimsolicitors.co.uk/compensation-negligent-accountants-financial-tax-advisors/) and [bad HMRC advice from tax advisers](https://professionalnegligenceclaimsolicitors.co.uk/bad-hmrc-finance-advice-sue-advisor/).

## What Happens If You Ignore a Schedule 36 Penalty?

Ignoring the penalty rarely makes it go away. HMRC can enforce penalties by the usual debt recovery methods, and the exposure tends to escalate. Daily penalties continue to accrue and can be increased, and HMRC may apply to the Upper Tribunal for a tax-related penalty. The underlying enquiry may also widen and, in serious cases, become a more formal investigation such as a [Code of Practice 9 investigation](https://taxdisputes.co.uk/tax-evasion-hmrc-code-practice-9-investigations/).

Unpaid sums can lead to a statutory demand and, for companies, a winding-up petition. If that happens, see our guidance on [opposing a winding-up petition](https://windinguppetitionsolicitors.co.uk/opposing-a-winding-up-petition/) and [setting aside a statutory demand](https://windinguppetitionsolicitors.co.uk/statutory-demand-set-aside-lawyers-london-hmrc/). If time to pay is the immediate issue, we can also negotiate with HMRC and, where appropriate, seek an [adjournment of the petition](https://windinguppetitionsolicitors.co.uk/obtaining-an-adjournment-adjourning-winding-up-petition-lawyers-london/).

## How Can LEXLAW Help You Challenge an HMRC Penalty?

Our tax disputes team is led by dual-qualified solicitors and barristers, including lawyers who have worked inside HMRC and at leading accountancy practices. We understand how HMRC officers assess penalties and where its decisions are vulnerable. Your first advice conference includes both a solicitor and a barrister, so you receive a clear view of your prospects at the outset.

We can review the information notice and penalty for validity, assess your reasonable excuse position, prepare your appeal and any witness evidence, negotiate with HMRC and represent you in the tribunal. You can find out more about our [HMRC tax penalty appeal service](https://lexlaw.co.uk/hmrc-tax-penalty-appeal-solicitor-london/), our wider work on [HMRC tax investigations and penalties](https://lexlaw.co.uk/hmrc-tax-investigation-penalty-advice-solicitors/) and our [tax tribunal representation](https://lexlaw.co.uk/first-tier-tax-tribunal-hmrc-representation-solicitor-london/). We act from chambers in Middle Temple, London.

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Please note that if you have been warned about your file being passed to HMRC's Solicitor's Office or have been served a statutory demand or winding-up petition do not delay in taking legal advice. Your matter can be handled more effectively the sooner you contact us.